Airy Labs and Ed-Tech Startup Failures

Audrey Watters

I've had a glimpse into some of the problems for a while now, and I opted not to write the story. I guess that makes me an awful ed-tech journalist. I'd prefer to think it makes me a good friend and counsel to those folks who are working as young (let's stress here: young) ed-tech entrepreneurs, bent on reshaping the "ed" and the "tech" and the "entrepreneurship" part of the equation.

There are plenty of sharks in the water. But I really really really try not to become one of them.

As I heard about the goings-on at Airy Labs, I thought through what I'd say and how I'd say it and what my larger thesis/analysis would be. And at the end of the day, it really just seemed like it wasn't worth my breaking the story about an education startup hitting the rocks.

In part, it's because Airy Labs was making free apps for the iPhone. No school budgets or teacher pocketbooks were harmed in the implosion of this startup. But lots of lives are.

And it is worth noting here, startup failure happens all the time. Startups burst onto the scene (and particularly now, in such "frothy" times, they burst onto the scene with substantial investor backing). They stumble. They pivot. They adapt. And often they fail and sometimes they die. They die silently with a few founders saying "well shit, that didn't really work out. Lessons learned. Let's move on." Or they die with a "hey, let's make things right. Let's pay back our investors and then get jobs or something."

Or, sometimes I guess, they die spectacularly and publicly, with stories in Techcrunch and a litany of nasty posts left on various forums around the Web.

It happens. It happens now, and it's happened in the past. The fact that we don't actually know much about our history -- as entrepreneurs or as educators -- is part of the very unfortunate (ed-)tech amnesia we all suffer from. Perhaps that's a big lesson to be drawn here.

But I don't think it's the only or most important one. Because the massive failure of management at Airy Labs is also part of this ridiculous Silicon Valley hubris we're witnessing these days, particularly in the education sector. It's one that says that technology necessarily holds "the answers" to "the problems" with education. It's one that says that the young and high-scoring-IQ and the Ivy-League-sanctioned know the best way forward. I mean, why ask someone who's spent 20 years in the trenches as a teacher how to fix education?! Let's instead ask 20 year olds to come up with a "fix" for education (and of course provide a healthy return on investment as they do so).

Years in the trenches and years alive aside, I'd argue that what's happened at Airy Labs seems less a failure on the part of genius 20-something than it is a complete and utter fuck-up on the part of the grown-ups involved. (I'm sorry for sounding age-ist here, I should add. I am, for the record, quite old.) As this particular story has played out, it seems that Andrew Hsu, the CEO and founder of Airy Labs, handed over control of his startup to his parents. And so yeah, in this case, I tend to blame a lot of the utter mismanagement that Anthony Ha describes in his Techcrunch story on Hsu's parents.

But the parents are only partially responsible. After all, Hsu was also one of the young prodigies crowned by Peter Thiel as part of his much-lauded Thiel Fellowship -- a program that paid a handful of smart kids tose under age 20 $100,000 each to drop out of college. And so, yeah. Here, I blame Peter Thiel for swooping in with a handful of cash and a laissez-faire "profit-from-you-later" sensibility.

We must ask here: what does the failure of Airy Labs say about Thiel's whole argument for dropping out? What does it mean for his argument that the best bet lies in backing young entrepreneurs and paying them very handsomely to drop out of school to start companies? And who's asking those questions? (I mean, other than me) Who's questioning Thiel's role, Thiel's mission, Thiel's philosophy? ("No comment" seems Thiel's response, according to Ha.) Who listens to Thiel? And why?

And if "no one is to blame" -- which is how the very libertarian Silicon Valley would like to situate things -- what then? I mean, if no one is to blame for the disaster at Airy Labs, what then? What happens if we buck that whole "hands-off" notion and instead scrutinize all of this in terms not so much a failure on the part of Hsu but on the part of Silicon Valley and its current mythos that young geniuses are de facto great entrepreneurs and good CEOs. Micro, macro, "investment worthy" -- I realize I'm blending a lot of trends and themes here.

As I do so, I should add that in this particular case (as far as I know) Hsu was the first (and perhaps the only?) one of the first batch of Thiel Fellows to receive more venture backing beyond Thiel's initial investment -- a nod, perhaps, from the larger investment community that Thiel can pick 'em when it comes to smart kids (Thiel was, of course, one of the first investors in the young Mark Zuckerberg's little project. You know, Facebook). Hsu's startup raised $1.5 million from Foundation Capital, Google Ventures, and Playdom's Rick Thompson. In some ways, the excitement over Airy Labs -- an untested, unprofitable gaming startup that still felt compelled to hire 20+ employees -- seems to confirm my very first reactions to the Thiel Fellowship: the whole thing seemed to me to be far less about "disrupting higher ed" than it seemed to be "buying early stock in some very bright minds."

I am not disputing here that Andrew Hsu is a very bright mind. He graduated from college with his first BS at age 16 (making the whole "I'll pay you to drop out of college" thing that Thiel promised seem more than a little silly in Hsu's case, considering the kid already had a degree).

And I should note here, in full disclosure, that it's been roughly one year since I first met and wrote about someone who eventually became another Thiel Fellowship scholar, Dale Stephens. Over the course of the past year, Dale has become a spokesperson of sorts for "dropping out" (or uncolleging) of college. Thiel must be proud (even though Dale hasn't been sanctioned by Thiel's VC buddies, he has been sanctioned by Penguin in terms of a book deal). I would argue that, as Dale travels the world and speaks about young folks questioning the expectation that they all must go to college upon high school graduation, he actually does a far better job than Thiel for making an argument about "the higher ed bubble." (Another side-note: Dale's profits in regard to such arguments are, I should add here, at a very different scale than investors looking for the next bilion-dollar-startup are probably looking for.)

Again, for the sake of clarity and openness: Dale has also become my dear friend -- one that I try very very hard not to go into "mom" mode with, considering he's roughly the same age as my own son. So take what I say here about Dale and about paying off any 19-year-old with a big chunk of cash -- whether you're Thiel or the student loan industry -- with a huge grain of salt.

But all that being said, I do think there's a big difference here between Dale Stephens and Andrew Hsu as Thiel fellows and as forward thinking education-entrepeneurs. If nothing else: if Dale fucks up, Dale just messes up his own world. He hasn't taken VC funding. He's "just" landed a book contract. He hasn't hasn't hired 20 employees. He hasn't asked his parents to mediate or moderate his new world (although I would say that there are a lot of adults that support Dale in part because he's asked us for advice, not for money).

And as we're (loosely) on the subject of parents and geniuses and entrepreneurship and the future of education, I'd say that Dale's parents must be good folks. They have an incredible son. But they also have been fairly hands-off over Dale's "career." It's not that Hsu's parents aren't good and that Hsu isn't incredible too, but part of the Airy Labs implosion seems to rest on the assertion that his parents did not operate the same way.

This too is where all this writing about Silicon Valley education startups gets weird for me. Funnily enough, of all the first year Thiel scholars, I've only met two: Dale Stephens and Andrew Hsu. Hsu, only very briefly. And admittedly, I think that's part of what made me very much not want to write about the clusterfuck at his startup. He seems like a good smart kid. And he's a kid (in my age-ist viewpoint, of course). If my kid fucked up (ha -- when my kid fucks up), I wouldn't blog about it. I wouldn't want it to hit Techmeme, let along hit the Facebook news feed. I just wouldn't, I just don't. There you go. But then again, my kid hasn't raised $1.5 million in funding. Hell, I've told my son to think seriously about his plans for college in no small part because I feel the student loan industry is a similarly sort of weird pay-off where adults bribe kids to do our bidding. It's gross. It skews kids away from independence and makes them dependent on their investors -- Thiel, Silicon Valley investors, student loan banks, what have you.

And of course, add to all of this mixed emotion on my end is the fact that Hsu's startup aimed to build smart educational games. And I really do want to see more "smart" in our sector. I liked Hsu's academic cred a lot (he has a strong background in thinking about "the brain"). Moreoever, I was particularly pleased that he'd hired Alicia Chang, a PhD in cognitive psychology, who seemed very committed to "getting things right" in terms of research and development and implementation and efficacy. Like Hsu (and like me and like Dale but not like Peter Thiel for those keeping score at home), Chang opted to leave academia for the startup world, believing her impact would be greater in the latter.

We're all looking for a big change. "We" meaning me, Dale, Andrew Hsu, Alicia Chang, Peter Thiel, investors, teachers, hackers, parents, students, drop-outs. We are all searching for the big potential and the big impact. But in this case -- in the case of Airy Labs and all the ripples it could send out in ed-tech and in investment circle etc, it all feels incredibly twisted and decidedly awful. Big change muted.

And me, I feel muted and saddened that we are still able to fuck up quite so spectacularly when it comes to "doing right" by what we do and build in education technology -- what we build and what we say and what we model and what we demand and what we want and who we are and what we fight for. Where the community of support around educators and around entrepreneurs? What happens when we turn to very young and inexperienced entrepeneurs and hand them a wad of cash and demand that they lead the way forward for the rest of us? What happens when they don't "do it right"? What happens to ed-tech when we don't help folks keep/back on track? And whose track are we even asking kids to be on? I say that, of course, meaning "kids" as students and "kids" as ed-tech entrepreneurs. And when I ask for folks to be "on track," I don't mean just "profitable" either -- another thing, I realize, that makes my expectations fall so very far outside the demands of a lot of the voices and urges in most tech circles.

And in most tech circles, I realize now that I've written all of this, that I probably sound much more shark-iike than I ever intended.